Waterloo, Canada – June 7, 2010 – The Centre for International Governance Innovation (CIGI) released today a special report and study which assess the Financial Stability Board. Both documents are part of a series of CIGI publications on G20-related issues coming out in the weeks leading up to this year’s G8 and G20 Summits hosted by Canada on June 26-27, 2010.
The special report, entitled The Financial Stability Board: An Effective Fourth Pillar of Global Economic Governance?, brings together leading experts and policy insiders in a pioneering effort to assess how effective the Financial Stability Board (FSB) will be, as a so-called “fourth pillar” in the evolving architecture of global economic governance, operating alongside the International Monetary Fund, the World Bank and World Trade Organization.
“The reform of global financial governance has been at the core of the G20 leaders’ summits since their origin and it will continue to dominate the agenda at the Toronto summit,” says Eric Helleiner, CIGI chair in international political economy at the Balsillie School of International Affairs and one of the co-editors of the report.
As well, notes Dr. Helleiner, “One of the most significant institutional innovations of the G20 has been the creation of the FSB, which was established to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies in the interest of financial stability.”
While the special report reflects a diversity of opinion, the authors agree FSB faces serious challenges if it is to be effective. Some of the key challenges identified by the contributors, and their recommendations:
- The FSB has been given a greater capacity than its predecessor, the Financial Stability Forum, to encourage compliance with international financial standards. To be effective in this role, however, it will need to develop an independent and robust surveillance process that applies more squarely to the major powers. The FSB’s new peer review process must also be supported by a strong secretariat and incentives to encourage countries to engage seriously with the process.
- The FSB’s focus on macroprudential regulation is very welcome, but complex technical challenges remain at the level of implementation. The FSB should continue to play an active role in supporting the development of international consensus and international coordination in addressing these challenges.
- At the governance level, the FSB has a wider membership than its predecessor, but the lack of representation of many non-member countries needs to be addressed. Greater efforts also need to be made to increase the voice of new developing country members within the organization.
More generally, the report comprises ideas for strengthening the governance structure of the FSB so that important warnings concerning potential systemic problems in the international financial system can be communicated in a manner that cannot be diluted by member governments.
The Financial Stability Board: An Effective Fourth Pillar of Global Economic Governance? was co-edited by Eric Helleiner; Stephany Griffith-Jones, Financial Markets Director, Initiative for Policy Dialogue, Columbia University; and Ngaire Woods, professor of International Political Economy and Director of the Global Economic Governance Programme, Oxford University.
Complementing the special report is The Financial Stability Board and International Standards, a new study by Dr. Helleiner.
Dr. Helleiner is the recipient of the 2006 Donner Prize for his book Towards North American Monetary Union (McGill-Queen’s, 2006), which examines the politics and history of Canada’s exchange rate regime and why a monetary union with the United States is unlikely to happen. His most recent co-edited books include Global Finance in Crisis: The Politics of International Regulatory Change (Routledge, 2010) and The Future of the Dollar (Cornell, 2009). He is presently co-editor of the book series Cornell Studies in Money.
The basic structure and mandate of the Financial Stability Board builds directly on those of its predecessor, the Financial Stability Forum (FSF). This paper examines whether the FSB will be more successful than the FSF in strengthening international prudential standards. The paper concludes that three features of the FSB will help overcome some of its predecessor's weaknesses: (1) the FSB has more members than the FSF; (2) it has been assigned more effective mechanisms to encourage compliance with international standards; (3) and it has been given a stronger capacity to tackle macroprudential issues. Each of these features also raises a number of new challenges and priorities to be addressed.
If these challenges and priorities are met successfully, the FSB will strengthen the institutional foundation of international regulatory cooperation. Rather than becoming a powerful international body, however, its role would remain primarily focused on facilitating transgovernmental networks, with ultimate responsibility for financial supervision and regulation still resting firmly at the national level or perhaps regional in the case of Europe.
To view or download a free copy of The Financial Stability Board: An Effective Fourth Pillar of Global Economic Governance? and The Financial Stability Board and International Standards,visit: http://www.cigionline.org/g20
Phone: 519.885.2444, ext. 238
E-mail: [email protected]
The Centre for International Governance Innovation (CIGI) is an independent, nonpartisan think tank that addresses international governance challenges. Led by a group of experienced practitioners and distinguished academics, CIGI supports research, forms networks, advances policy debate, builds capacity, and generates ideas for multilateral governance improvements. Conducting an active agenda of research, events and publications, CIGI's interdisciplinary work includes collaboration with policy, business and academic communities around the world. CIGI was founded in 2002 by Jim Balsillie, co-CEO of RIM (Research In Motion), and collaborates with and gratefully acknowledges support from a number of strategic partners, in particular the Government of Canada and the Government of Ontario. For more information, please visit: www.cigionline.org
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